Is Blockchain Capable of Taking On Global Inequality?

Is Blockchain Capable of Taking On Global Inequality?

Written by Maria Fonseca and Hernaldo Turrillo

Among all the scenarios blockchain technology can be applied to, taking on global inequality is precisely one that hasn’t been spoken enough yet. In fact, inside this distributed ledger technology might reside the key for a fairer shared economic future… or not… depending on the way the technology ( and the people behind it) evolves.

If there is something globalisation has done,  is how it made almost all the globe, part of the production chain, and therefore, part itself of the capitalistic wheel. For good, it has expanded to include many ‘potentially’ attractive countries to grow their very own industries – although mostly manufacture – based, and with it, millions of people have been able to find a job and make a living with it. I have seen this happen in Portugal, my homeland, where in the eighties and nineties, the quick industrialisation provided opportunities for people, still dependent on a rural economy. 

On the other hand, nowadays, the workers coming from emerging countries are not treated as well as in western counterparts, which in the end means inferior wages and poorer quality standards for them. This rapid shift to industrialization has its negatives as well, in terms of the externalities it produces, as a constant production “machine”, now on a global scale, has tremendous impact on the environment as we have seen. But that is another story…

Unfortunately, the main corporations are still set in Europe and USA and they still operate  according to traditional business rules (offering products which are better and cheaper than competition), which are still scrupulously followed from the very beginning of the production chain.

Countries in emerging economies, are not able to negotiate the conditions set by corps, as international markets are still the closest thing to a proper wild wild west. Even if having te best intentions, if countries like India choose to high up national minimum wages and protect worker rights more reliably, corporations will relocate their factories somewhere else, compromising in the way millions of families who rely on them.

Roughly, this is still the definition of inequality in our worldwide spread capitalist system and the future we are heading to is quite uncertain in terms of job stability and growth rates. The main issue here is indeed the unfair distribution of the wealth. Capital keeps in the same hands over and over again while the poorest get just a glance of it.

The problem lies in the distribution of wealth

The scenario is set, but what about solutions?

If in advanced economies, technology has also contributed to some degree of inequality, due to its profound impact on employment, making lots of jobs obsolete, there are new technologies that can help tackle the issue of inequality in a positive way.

Don and Alex Tapscott, are two important writers who have researched blockchain technology thoroughly. According to an article they wrote for the WEF, last year, blockchain has the potential to tackle the high inequality rates we live in today. For them:

“Through the blockchain, we can go from redistributing wealth to distributing value and opportunity fairly in the first place, from cradle to grave. Including billions of people in the global economy: protecting rights through immutable records like land titles; creating true sharing economy by replacing service aggregators like Uber with distributed applications on a blockchain; ending the remittance rip-off and helping diasporas return funds to their ancestral lands; enabling citizens to own and monetize their data (and protect privacy) through owning their personal identities rather than identities being owned by big social media companies or governments; unleashing a new halcyon age of entrepreneurship by enabling small companies to have all the capabilities of large companies; helping build accountable government through transparency, smart contracts and revitalized models of democracy.”

The idea is to distribute the wealth before it has even been created so the possible outcome would be automatically shared with all stakeholders, which for instance would be the citizens.

The pre-distribution paradigm

The example of using blockchain capabilities to create a decentralized and a fairer economic system is also mentioned in an article by Nicolas Berggruen at The Washington Post.

He points out his idea of wealth distribution, in which instead of re-distribution (which is really post-distribution), we should be talking about pre-distribution: instead of ameliorating inequalities through the tax and benefits system once they have occurred, we can lower inequalities by making everyone a stakeholder, putting everyone in the same boat and endowing everyone with access and dignity. This model would continue to foster innovation and investment while giving everyone a stake in the future.

He says, “Fundamentally, pre-distribution proposes a moral economy in which every citizen is due and is given a “share” of a country’s income and productive capacity from the start. This moral understanding of a rightful share has so far been mainly utilized with mineral wealth. But applied to the fruits of our high-tech economy, it suggests a radically new sort of sharing economy. Digital wealth can be thought of as the oil of the 21st century — except now it is possible to generate this wealth everywhere, not just where the minerals happen to be underground.” 

This capacity has profound implications for enabling an authentic sharing economy and with high implications in the incoming new robotic breakthrough.

For example, each new robot in an autonomous vehicle fleet could be fractionally owned by every member of the community in which it operates. Every time someone purchased a ride with one of the vehicles, rather than the income only going to a private company, it could be distributed to everyone in the community.

Berggruen’s examples are still very far from the daily problems we face in our reality. The automation he mentions, has already made many adopt the some sharing economy platforms such as Airbnb, to complement their income, which is not enough anymore, even in advanced economies. A more realistic and understandable alternative, could thus be a new type of Airbnb which would be co-operatively owned. That new platform, would operate in such a way, that everyone which would sign up, would be automatically a co-owner of the house sharing platform.

And that is the point where blockchain comes to light. Blockchain can be the technology that can enable this shift. This capability makes blockchain a potentially powerful accelerant for ensuring that everyone can own a share of economic goods. Nicolas Berggruen’s case is that instead of trying to make up for technologically driven job displacement via UBI (universal basic income), blockchain makes it possible to address inequality at its root, on the production side. Instead of waiting for the inequality to happen and then addressing it via a universal basic income, we can instead pursue the idea of a universal right to intellectual and capital goods — a universal basic capital. 

The utopia and the reality

A word of caution is needed here, as unfortunately the way things happen in reality is not black and white … but messy. Last year, we saw various new projects coming from the blockchain community, that took on the idealistic ideas outlined previously.  What we have seen though, sharply contradicts the utopia. The people leading  some of those projects, begin by using them to gather immense investment to their startups by adopting the new funding system of the ICO (Initial Coin Investment) and then, move on to other funding alternatives such as Venture Capital. Fortunes are made very quickly, as the ones leading those projects always pay themselves very well, thus becoming part of the “business as usual” landscape. 

The scientist who pioneered blockchain,  Vitalik Buterin, became aware of this, and on some recent tweets,  he mentioned how “the blockchain community needs to grow up” , and asks poignant questions: 

Tweet by Vitalik Buterin

By the end of the day, it is not only a technology that can reduce inequality, but a total transformation in the mindset of the people leading the projects, and its system of funding.  If blockchain still has the potential to reduce inequality, that will only be possible by a shift in consciousness, which will take time to happen.

In the meanwhile the route can be to experiment and implement a myriad of solutions  which include UBI, Universal Basic Capital, tax and benefit system, global wealth tax, such as the one advocated by Piketty and other solutions, yet to be discovered.